Correlation Between James Hardie and Knife River
Can any of the company-specific risk be diversified away by investing in both James Hardie and Knife River at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining James Hardie and Knife River into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between James Hardie Industries and Knife River, you can compare the effects of market volatilities on James Hardie and Knife River and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in James Hardie with a short position of Knife River. Check out your portfolio center. Please also check ongoing floating volatility patterns of James Hardie and Knife River.
Diversification Opportunities for James Hardie and Knife River
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between James and Knife is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding James Hardie Industries and Knife River in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knife River and James Hardie is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on James Hardie Industries are associated (or correlated) with Knife River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knife River has no effect on the direction of James Hardie i.e., James Hardie and Knife River go up and down completely randomly.
Pair Corralation between James Hardie and Knife River
Considering the 90-day investment horizon James Hardie is expected to generate 1.87 times less return on investment than Knife River. In addition to that, James Hardie is 1.07 times more volatile than Knife River. It trades about 0.07 of its total potential returns per unit of risk. Knife River is currently generating about 0.14 per unit of volatility. If you would invest 3,551 in Knife River on August 28, 2024 and sell it today you would earn a total of 6,855 from holding Knife River or generate 193.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 76.16% |
| Values | Daily Returns |
James Hardie Industries vs. Knife River
Performance |
| Timeline |
| James Hardie Industries |
| Knife River |
James Hardie and Knife River Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with James Hardie and Knife River
The main advantage of trading using opposite James Hardie and Knife River positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if James Hardie position performs unexpectedly, Knife River can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Knife River will offset losses from the drop in Knife River's long position.The idea behind James Hardie Industries and Knife River pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Knife River vs. Radcom | Knife River vs. Kite Realty Group | Knife River vs. Morgan Stanley | Knife River vs. Stepstone Group |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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